The City of Pittsburgh’s challenge of hospital giant UPMC’s nonprofit tax exemption was dismissed Wednesday in the Allegheny County Court of Common Pleas.

UPMC is a corporate umbrella for 44 hospitals and other ventures and Judge R. Stanton Wettick said in a ruling nothing in the law allowed the parent corporation to be considered as a single taxpayer with its subsidiaries. Ron Barber, the lawyer who represented the city in the tax case, was not immediately available for comment, but said previously the city would pursue each UPMC subsidiary individually if necessary.

“There is nothing in the Enabling Act or the Payroll Tax that compresses several taxpayers into a single taxpayer,” Wettick wrote. “Under the clear language of the Enabling Act and the Payroll Tax, the payroll tax is levied upon the entity that conducts the business and pays the salary.”

As a paper corporation, UPMC argued it had no employees, which seems implausible because it’s the biggest nongovernmental employer in Pennsylvania. But judges have been loathe to “pierce the corporate veil,” holding the parent corporation accountable for the actions of its subsidiaries except in unusual circumstances.

The city wants to remove UPMC’s tax exemption and require the hospital system to pay the city’s 1 percent payroll tax. Barber, a shareholder in the downtown law firm of Strassburger, McKenna, Gutnick and Gefsky, said UPMC owes some $10 million in payroll taxes for 40,000 employees who worked in Allegheny County dating back to 2007.

UPMC also owns properties valued at $1.3 billion, which means the system would owe about $32.4 million annually in property taxes if its nonprofit status is overturned.

UPMC was pleased by the ruling.

“By throwing out the city’s tax-exempt challenge to UPMC, the court clearly agrees that the city’s case had absolutely no merit,” spokesman Paul Wood said in a written response. “We are very pleased to defend UPMC’s charitable status if there should be any further legal action.”

Pittsburgh Mayor Bill Peduto said in a prepared statement the ruling was on a procedural issue and not on the lawsuit's merits.

"Our lawyers are reviewing the decision and will advise me on our legal options," Peduto said. "We are eager to continue to meet with UPMC and other nonprofit partners to formalize a collaborative long-term agreement that addresses our structural financial needs, invests in our neighborhoods and workforce, and delivers upon their charitable commitment to our community."